From EconPapers. The first article lets you follow up on the political economy of political systems that overrepresent the interest of retirees. (Of course, if you read the abstract that’s not their phrasing.) The second addresses the point I’ve made in class and on the blog, that the social security trust fund is economically meaningless; they stress how it has led the debate over retirement in counterproductive directions.

Steve Rattner worked very hard on behalf of our economy with the Auto Task Force. The US was already in the throes of the Great Recession. Had the bankruptcy process not been handled in a timely manner, our economy would have been thrust into a second depression. (See the related Autos and Economics blog.)

However, while Rattner has been able to step back and rethink standard ways of doing things in the realm of corporate restructuring, he has not similarly been able to distance himself from received thinking on fiscal issues. Above all, he continues to view retirement security (Social Security and Medicare) as boats that ought to run on their own bottoms. Since money is fungible, there is nothing inherent in this, except as it changes the politics. However, over the last four decades Congress has not treated the operating budget as something separate from these programs. The “on-budget” and “off-budget” distinction is irrelevant.

Corsetti et al (2012) use a “Taylor Rule” approach to estimate normal (endogenous) fiscal policy, and then use the error in the fitted values as a measure of “true” fiscal policy that would not be automatically included in the variables of a typical VAR. They then use this to test the size of the multiplier, using a panel of countries to include ones with pegged vs floating exchange rates, with high debt levels, and in a financial crisis.

There’s a certain fascination with gold; it seems to offer a way to constrain central bankers, at one end of the rules versus discretion debate. Mind you, central banks don’t have a stellar track record. The Federal Reserve raised interest rates during the onset of the Great Depression, surely worsening matters. That’s a core criticism of Milton Friedman and Anna Schwartz in their Monetary History of the United States. So it’s sensible to ask if there’s a viable alternative.